On June 24, 2022, China's Anti Monopoly Law completed its first revision fifteen years after its promulgation and came into effect on August 1, 2022. The new Anti Monopoly Law significantly increases the legal responsibility for illegal implementation of concentration of business operators. "If the anti-monopoly enforcement agency of the State Council orders to stop the implementation of concentration, dispose of shares or assets within a specified period, transfer business within a specified period, and take other necessary measures to return to the state before concentration, a fine of no more than 500000 yuan may be imposed." It is revised to "If it has or may have the effect of excluding or restricting competition, the anti-monopoly enforcement agency of the State Council orders to stop the implementation of concentration, dispose of shares or assets within a specified period, transfer business within a specified period, and take other necessary measures to return to the state before concentration, a fine of no more than 10% of the sales revenue of the previous year may be imposed. If it does not have the effect of excluding or restricting competition, a fine of no more than 5 million yuan. However, in the past two years, the State Administration for Market Regulation has not released any cases of illegal implementation of business concentration that are subject to penalties under the new Anti Monopoly Law. On June 7, 2024, the State Administration for Market Regulation issued a decision on the administrative penalty for Zhengzhou Haili Electric Appliance Co., Ltd., a joint venture established by Shanghai Haili (Group) Co., Ltd. (hereinafter referred to as Shanghai Haili) and Qingdao Haier Air Conditioning Co., Ltd. (hereinafter referred to as Haier Air Conditioning), which failed to declare the illegal implementation of concentration of operators in accordance with the law. This "boot" has finally landed, and the case is of great demonstration significance and deserves high attention from enterprises.

1、 Basic case details

On January 19, 2023, Shanghai Haili (ultimately controlled by Shanghai Electric Holding Group Co., Ltd.) and Haier Air Conditioning (ultimately controlled by Haier Group Co., Ltd.) signed a joint venture contract with Zhengzhou Haili Electric Co., Ltd., intending to jointly establish a joint venture enterprise in Zhengzhou, Zhengzhou Haili, to engage in the production and sales of air conditioning rotary compressors. Shanghai Haili holds 51% equity of the joint venture, while Haier Air Conditioning holds 49% equity of the joint venture. On March 13, 2023, the joint venture Zhengzhou Haili Electric Appliance Co., Ltd. obtained its business license.

2、 Qualitative analysis and processing decisions

（1） Qualitative analysis

Firstly, this case constitutes a concentration of business operators that has not been declared and illegally implemented in accordance with the law. Firstly, Shanghai Haili and Haier Air Conditioning established and jointly controlled the joint venture Zhengzhou Haili, which falls under the concentration of operators as stipulated in Article 25 of the Anti Monopoly Law. Secondly, in 2022, both Shanghai Haili and Haier air conditioners achieved the declaration standards stipulated in Article 3 of the State Council's Regulations on the Declaration Standards for Business Concentration, which is a situation that should be declared. Once again, on March 13, 2023, the joint venture was registered and established. Prior to this, it had not obtained approval from the State Administration for Market Regulation, which violated Article 26 of the Anti Monopoly Law and constituted a concentration of business operators that had not been declared and illegally implemented in accordance with the law.

Secondly, this case does not have the effect of excluding or restricting competition. The State Administration for Market Regulation has assessed that the establishment of a joint venture between Shanghai Haili and Haier Air Conditioning, Zhengzhou Haili, will not have the effect of excluding or restricting competition.

（2） Handling decisions

In accordance with the provisions of Articles 58 and 59 of the Anti monopoly Law, taking into account the nature, extent, duration and elimination of the consequences of the illegal acts of the parties, the State Administration of Market Supervision believes that this case does not have a heavier punishment. At the same time, considering that the two parties to the concentration are the first to illegally implement the concentration of business operators, and can actively cooperate in the investigation of the illegal concentration of business operators and actively provide evidence materials, the operators actively rectify after the illegal concentration, establish and effectively implement a sound anti-monopoly compliance system for concentration of business operators, etc., it has decided to impose an administrative penalty of 1.5 million yuan on Shanghai Haili and Haier Air Conditioning respectively, and publicize it through the national enterprise credit information publicity system in accordance with the law.

3、 Inspirational significance

In the case of Shanghai Haili and Haier Air Conditioning establishing a joint venture but failing to declare illegal implementation of concentration of operators in accordance with the law, we have noticed several key signals released by this punishment: the State Administration for Market Regulation has applied the new Anti Monopoly Law for the first time to impose penalties, disclosed the factors of discretion in detail, and clearly issued signals of equal treatment, increased punishment, and meticulous law enforcement. This serves as a warning to enterprises that they must not take the concentration of operators lightly, in order to avoid causing major disasters and regret later.

Firstly, enterprises of different natures must strictly comply with the regulations on the declaration of concentration of operators. The final controller of Shanghai Haili is Shanghai Electric Holding Group Co., Ltd., and the final draft controller of Haier Air Conditioning is Haier Group Co., Ltd. Regardless of whether it is state-owned or private enterprises, domestic or foreign-funded enterprises, listed or non listed companies, anyone who violates the Anti Monopoly Law and engages in illegal concentration of operators will be unable to escape legal sanctions. Regardless of the nature of the enterprise, it is important to attach importance to the declaration of concentration of operators and minimize the risk of illegal activities.

The second is that the minimum fine for illegal implementation of concentration of business operators may be 1.5 million yuan. The new Anti Monopoly Law has raised the upper limit of fines for illegal implementation of business concentration (when competition is not excluded or restricted) from 500000 yuan to 5 million yuan. How the State Administration for Market Regulation exercises its discretion has always been a topic of concern for all sectors. Through this case, we can find that the viewpoint of "no punishment for the first violation" does not apply to the illegal implementation of business concentration behavior. In cases where the illegal behavior lasts for a short period of time (less than 7 months from implementation to filing), actively cooperates, and actively rectifies, law enforcement agencies have imposed a fine of 1.5 million yuan on the parties involved, unless there are other legally mitigated circumstances, which may become the bottom line for illegal implementation of administrative fines for business concentration in the future.

The third is to establish and effectively implement an anti monopoly compliance system for concentration of operators. This case not only considers the nature, degree, duration, and elimination of consequences of illegal activities, but also specifically considers the establishment and implementation of anti monopoly compliance systems for concentration of operators, and considers them as one of the factors for lenient punishment. This inspires us that large-scale enterprises, especially those with a turnover exceeding 800 million yuan in the previous accounting year in China, should attach great importance to establishing and improving the anti monopoly compliance system for concentration of operators. This can not only prevent illegal implementation of concentration of operators to the greatest extent possible, but also increase the possibility of lenient punishment after occurrence.

Annotations and citations

[1] The State Administration for Market Regulation has issued an administrative penalty decision on the establishment of a joint venture between Shanghai Haili and Haier Air Conditioning, Zhengzhou Haili, for failing to declare and illegally implement a concentration of business operators case in accordance with the law, https://www.samr.gov.cn/fldys/
tzgg/xzcf/art/2024/art_41ec83f4b9d64e3aa247528a81575aa6.html。 The basic case, qualitative analysis, and handling decisions in this article are all referred to in the administrative penalty decision.